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Philly’s Soda Tax Fizzling

Philadelphia is finally reaping what it sowed in 2017 when it introduced a 1.5 cent per ounce tax on all sweetened (naturally or artificially) sodas in order to fund a universal pre-K program, while ostensibly promoting healthier living in the process. In a classic example of unintended consequences, at least for the shortsighted socialists who would even think up such a policy to begin with, this program has gone flat on many levels.

First, it has not reduced soda consumption at all. In fact, in Seattle, where a similar tax was instituted in January of 2018, the city council has not only seen more revenue generated by the tax than had been predicted, but they are budgeting for an even greater increase in 2019. This indicates that they tacitly acknowledge that there is absolutely no net health benefit for implementing the tax, despite the fact that reduced consumption of unhealthy beverages was a selling point of the tax in that city. On a side note, the mayor seems to believe that the tax was justified because diet soda was “more likely to be consumed by ‘upper middle class white people,’” so he decided that it was “‘an issue of equity’” as “a way to tackle ‘white privileged institutionalized racism.” Because of course the soda companies target “communities of color with a product ‘that only undermines the health of young people,’” so they are racist and deserve for their product to be heavily taxed. Although if you follow that logic through, who will be bearing the greater burden of such a tax? That’s right, the communities of color, in an apparently unintended consequence, since they are not reducing their consumption of the offensive drinks, as the city council’s budget acknowledges.

In Philadelphia, while consumption is not down, much of the soda sales have moved just outside the city, leaving the city 15% short on projected revenue from the tax. However, it is mainly only the middle class who can go outside the city to do their shopping, and the lower class people who stay inside the city are still buying soda at the same rate. Since the tax is passed along in the price of the product instead of as an actual sales tax, federal SNAP (food stamp) benefits cover the cost of the tax as part of the benefit, and people using SNAP benefits drink a lot of soda. In fact, a study from 2016 found that soda “account[ed] for nearly 10 percent of such spending.” Of course, spending the benefits on the higher priced soda will leave them with less benefit to spend on other food, but this does not seem to be a deterrent. Additionally, some have found that beer can be cheaper than soda, and there has been a correlated increase in alcohol sales in the city as a result, another unintended consequence of the ill-conceived tax.

Meanwhile, city leaders seem to be in denial about the economic impact that the tax is having on local businesses, accusing business owners critical of the tax of simply blaming the tax, presumably for their own failed business policies. However, the 42% decrease in soda sales inside the city equaled about an $80,000 per month loss in beverage sales per store. Many of those customers who took their beverage business outside the city also decided to do their other shopping while there, meaning the total monthly loss per store is closer to $300,000 based on a 2017 study

A specific example of this is represented by Jeff Brown, who city leaders say has produced no evidence of the tax’s impact on his 12 area supermarkets. His markets are located in both the city and the suburbs, but the ones in the city have seen a loss of 15% in sales since the soda tax took effect. One store in particular, the one that he is closing, saw sales go down from $30.5 million in 2016 to $23.4 million in 2018. This is a nearly 25% loss. Brown takes pride in what he has been doing in the Philadelphia area: hiring 600 employees who have a criminal background and would otherwise have a difficult time getting a job and restarting their lives, and providing supermarkets with fresh and healthy food options in former food deserts. This is all being put in jeopardy because of this vendetta that the city has against soda, leaving a food desert again in the area where he is closing one store, and putting 200 employees out of jobs.

Finally, it must be noted that while many of the lower income who are continuing their purchases of soda at the higher prices are receiving federal food stamp benefits that cover the cost (your tax dollars at work, subsidizing this pathetic attempt at social engineering), there are others who are not receiving such benefits and are bearing the brunt of this wildly regressive tax. Those who can afford to are simply taking their business out of the area so they don’t have to pay the excessive costs. The poor can’t afford to do that, and the statistics show that they are not eliminating the beverages from their shopping carts. So perhaps the city will find enough revenue elsewhere to make up the 15% shortfall between projected revenue and actual revenue from this tax so that it can fund the universal pre-K program as intended, but the lower income people who need that program the most are out of pocket more money in exchange. I don’t think that they expected to pay for the program themselves, especially before or after they have pre-K aged children. This is the sort of results that mindless, virtue-signaling, progressive policies deliver.

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